How do those “free dinners” really work?

You’ve probably got a dinner invitation in your mail. Free dinners are popular marketing ploys. “The hook” is the free meal. You bite. The salesperson reels you in with a compelling presentation. They land you when you buy what they’re pitching. No surprise – typically it’s an annuity. Why typically? Because they have high commissions, usually the highest in the industry.

Salespeople who use “seminar” marketing – what the insurance industry calls these dinners – so they can recoup their marketing costs and earn their living. I don’t begrudge their need to earn money. But the motive to sell you something is hidden to most but the astute. It is hard to resist the lure.

Direct mail is where the process begins. You’ll get an idea of how massive the direct mail industry is, even by USPS, simply to Google “how do I get a list of addresses for mailing via USPS.”

Everything you do, and your neighbors do, is compiled and analyzed by computers. Direct mail companies can segment you a number of ways. To see how, just scroll through the home page of one of those companies called Mail Shark (even the name hints at motivations)

There, you will see “Five Main Ways to Segment Your Mailing List.” These are used to find people with money and/or people who may be predisposed to buy. Segmentation by Geography (where you live), Demographics (how old you are or income or savings you have), Pyschographic (hobbies, personality, values) and Sales Stage (how you buy stuff). Other marketing companies have other methods including these too.

Sum so far: Direct Marketing: So just like pro fisher men and women, they know where “the fish” are to begin with!

Direct Marketing has costs to buy those lists. Then there are Printer costs to print the “invitation” you get in the mail. Then there are costs to mail those invitations via USPS. And finally of course, is the cost of that “free meal” itself. All those costs add up. Salespeople have to mail out many thousands of those “invitations” to get less than 1% to respond and come to the dinner (in this case you’re a “1 percenter;” not by income, but by going). Some salespeople do all this via the internet to cut out the costs of printing and mailing, but the motivation is the same – get numbers into dinner to start their sales pitches.

So the salesperson lands only a few people coming into their office for that sales pitch, and even fewer people buying something. Those who buy are the ones paying for all those above expenses including the salesperson’s net commission after expenses.

The presentation is often heavy on the pros and light on the cons, if they even mention annuities* at all at the dinner. They play on worries, concerns and fears. Even greed.

Here’s a couple of great articles that discusses these dinners and sales pitches and once you’ve finished dinner. Note even the articles are heavy on product and light on planning. Just like the dinner and after-dinner sales presentations and pitches.

Little of the above has anything to do with real planning which looks at your overall picture IN DEPTH.

Planning is not the same as investing. Here’s a Cable and Bridge analogy describing the difference. Another analogy fuel and airplanes. In both analogies, the focus is typically on the wrong thing. In the case of dinners, the focus is on a specific product (the real agenda is for you to buy it), rather than planning which is the bigger picture that isn’t even discussed in any real depth at the dinner or office sales presentation.

The planning process as designed by the CFP® Board of Standards has multiple steps, over multiple meetings, giving you time to learn, reflect, consider, evaluate, tweak alternatives, and finally decide. All with NO PRESSURE to buy anything. Planning is all about process, not product*! And the process by fee-only fiduciary planners is all about you and what you are trying to do. You can use NAPFA to find a fee-ONLY adviser near you.

Photo by Patryk Dziejma on Stocksnap.

*Annuities are high commission products which is why they’re heavily promoted, especially at, or after, free dinners (so the salesperson recoups all those expenses). Annuities are products which, like all products, grow outdated over time (why do insurance companies keep redoing them if they didn’t grow outdated in the first place?). Insurance sales people then churn old annuity products into new ones for a new commission (leaving you with a new surrender period too).

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